CHC Contract Raises Questions

April 9, 2012

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Why would anyone be surprised that a questionable hospital billing contract was penned between the Commonwealth Health Corporation's CEO Juan Babuata and a newly formed company in Idaho? Other questionable contracts, like Michael Ada's ARRA backdoor deal was allowed to fly. Similar deals have been made and defended by CNMI officials, including questionable consulting contracts.

Perhaps what is surprising is that the CHC CEO signed a contract with a new billing organization since the institution cannot even pay its personnel, vendors or utility bills on time.

In March 2011 it was announced that the CHC had signed a six-year sole sourced contract with Idaho-based International Consulting Services, LLC (ICS). The Saipan Tribune reported:
Sources privy to the negotiation disclosed that the company will be paid for the first three years an 11 percent commission on the total amount it will collect per year. The fee will increase to 11.5 percent in the last three years of the contract.

For example, if the company successfully collects $20 million a year, it will be paid $2.2 million that will increase to $2.3 million per annum in the remaining three years of the contract.

The six-year contract may also be renewed for another year if both parties want to do so.

Prior to the corporation takeover in October 2011, Guam Marianas Collection Agency was handling the billing services of the Commonwealth Health Center. It was also being paid through percentage commission.

It was learned that the sole-source contract with International Consulting was executed before Gov. Benigno R. Fitial declared a state of emergency for the public hospital on March 6. It is only during emergency declarations that procurement regulations are suspended throughout the declaration period.

The signing of the contract was done when Babauta was officially off-island in Washington, D.C. for a conference.
Today The Marianas Variety's investigative journalist, Tammy Doty reported that CNMI Attorney General Edward Buckingham questioned the legality of the contract that was only signed by Babuata and ICS.

The registered agent of ICS is Attorney Gary Cooper. The company's certificate of organization was filed with the Idaho Secretary of State on February 24, 2012. It lists JAG Consulting, organized December 12, 2011 and Cochran Healthcare Consulting organized on January 9, 2012, as members of the LLC.  The registered agent of JAG is listed as Louis Kraml; the registered agent of Cochran is Dan Cochran. Kraml is the CEO and Cochran is the COO of Bingham Memorial Hospital in Blackfoot, Idaho.

On January 23, 2012, JAG filed an application for amended certificate of authority of foreign limited liability company, adding Attorney Valerie Kraml of Berkeley, California as a member.

The Commonwealth Health Corporation's CEO Juan Babauta was in San Francisco to attend a Region 9 conference in late February and early March 2012.  The contract was signed on February 28, 2012.

The dates of the organization's registration suggests that the company was established for the purpose of landing the CHC contract. ICS was registered on February 24, 2012 and the contract was signed 4 days later on February 28, 2011. The Saipan Tribune reported:
Representatives of the new company, he said, were in fact at the hospital, setting up machines and equipment since last week. The contract was entered into on Feb. 24 but formally executed on Feb 28.
Reminds me of the Michael Ada ARRA contract where his company was issued a business license after the contract was approved.

Odder is this statement from the Saipan Tribune: "Torres said that prior to the contract approval, the board and Babauta did extensive research on the matter and both were impressed with the company's success rate." Since it was a newly registered company how did it have a success rate? Were they referring to Kraml's other company, JVL Management, LLC that was registered in December 2008? Or his nonprofit, Regional Health Alliance, Inc. registered in 2008; or Pietra, LC registered in October 2008; or LDK LLC registered in January 2010; or Idaho Quality Advocates registered in January 2008; or Kraml Private Investigations, LLC registered in January 2012;  or Kconco registered in December 2008; or Idaho Physicians Clinic, LLC registered in 2007; or any of the others?

I could locate no websites for JVL, ICS, Jag Consulting or Cochran Healthcare Consulting, which also seems strange.

The Guam Marianas Collection Agency was retained by CHC in April 2011. It is unclear whether or not the contract with GMCA ended before ICS was retained.

The Marianas Variety story suggested that CEO Babauta and CHC Advisory Board Chairman Jack Torres have family connections in Idaho and an unnamed attorney said that the contract looks like a "sweetheart deal".


Anonymous said...

All of these sole source contracts stink, they smell of corruption. All the people involved colluded to the max.

Anonymous said...

The whole Commonwealth is a fraud, evidenced by electing Juan Babauta, electing the crook that appointed him, and then re-electing that same crook to five more years.

JB is very qualified at assembling a team to build Rose Bowl floats, but this is an odd time of year for that.

Anonymous said...

This will be forgotten too in due time. What's next?

By the way, don't get sick especially after the 17 nurses who resigned are out!

Anonymous said...

So can you tell us if Louis Kraml was in Saipain last week or was his front man Dan Cochrane sent there to meet with officials?

Am I correct in that all the billing was to be through Bingham Memorial Hospital?